Last Saturday was the 10th International Record Store Day, an annual event to celebrate independent music shops. A key feature is the list of exclusive and limited edition vinyl releases, most of which can only be bought in selected participating stores – in person and on the day. But there are also loads of other promotions and live events, designed to get people browsing the racks in their local retail outlet. In an age when streaming services now account for the bulk of US music industry revenues, what is the future of the neighbourhood record shop (those that are still left, that is)? Will streaming services kill off digital downloads, as well as sales of physical product like CDs and records?
Despite the sense of doom that has permeated the record industry in recent years (if not decades!), there is also a feeling that, just as the internet has not yet managed to kill off the publishing industry, digital has not yet killed the radio star. The independent music industry in particular has found a way to survive, and retail stores are still an important part of the business.
So, what are the recent trends in music industry sales and business models?
First, the continued rebound in vinyl sales (at least in the UK) show that there is renewed interest in this 70-year-old format, with industry data showing a 25-year high (but not yet a return to the 1980s’ peak). Record Store Day is generally credited with boosting vinyl sales. And to be fair, even music streaming services have contributed to this growth, through curated content, recommendation engines and user preferences: meaning that listeners get exposed to a wider range of music and artists than they would from traditional Top 40 radio, and they get to explore and discover new music.
Second, digital downloads, once seen as the industry growth engine, are facing a pincer attack, from streaming services as well as vinyl sales. No wonder that Apple is expected to slowly and quietly retire the iTunes download store, and shift more focus onto its own Apple Music subscription service. The music industry (especially the dwindling number of major labels) didn’t really “get” the internet. Having just competed in the CD-format wars, the major labels then competed on digital file formats, and tried to lock their digital content to proprietary players and software protocols. Some of this reticence was justified – thanks to digital piracy and illegal file sharing – but they didn’t (and still don’t) help themselves by poor CX on their retail websites (if they have an e-commerce presence at all), and adherence to arcane geo-blocking.
Third, many musicians are benefiting from increased exposure via streaming services – although with Apple Music and Spotify seemingly leaving the other platforms far behind, the downside risks from a dominant duopoly don’t need spelling out. Especially as the royalty payments from streaming are generally much smaller than they would have been from physical sales, “traditional” downloads and radio airplay. This source of friction between labels, their artists, music publishers and online content platforms surfaced again earlier this month, in a spat with YouTube over fees for video streaming.
Fourth, in a new move in the streaming wars and the battle to win mobile screen real-estate, Australian startup Unlockd has just secured a deal with MTV UK to stream free music videos in return for viewing ads. It’s also a move designed to counter ad-blockers and locked screens, while finding another way to distribute sponsored content. Elsewhere, some mobile carriers are now including music streaming services as part of customers’ un-metered data consumption, although what this may mean for artist royalties and the revenue share from ad-supported content on Spotify etc. is unclear.
Fifth, as another example of how the music industry is having to adapt, UK startup Secret Sessions is using a combination of social media, independent/unsigned artists and major brand licensing deals to find new ways to generate revenue streams for artists that can no longer count on income from traditional sales-based royalty deals, especially with the diminished licensing revenues from streaming services.
Sixth, as further evidence that all is not well in the world of music streaming, SoundCloud continues to lose its way. Once the music service of choice for user-contributed content created by independent and unsigned musicians, it got greedy and has been subject to recent speculation about its financial health and future.
Initially, SoundCloud was all about the makers and producers – helping artists connect with their audience, via a simple but effective website and mobile app. It also meant that at first, SoundCloud charged musicians and labels under a “pay to publish” model, while listeners could simply stream (and sometimes download) all this content for free. Then, it alienated many of its earliest supporters and champions, by introducing “ad-supported” streaming (with priority access going to labels and artists with big marketing budgets, who could also attract/demand the lion’s share of the advertising revenue).
SoundCloud also seriously messed with the app, making it far less useful to artists, and then introduced its own subscription-based streaming service, SoundCloud Go. Only, it wasn’t satisfied with just one subscription model, and recently announced an “upgrade” – whereby the “old” service became “SoundCloud Go+“, and a “new” SoundCloud Go was launched. Confused? You will be….
Meanwhile, Bandcamp continues to outperform the industry, in terms of annual sales growth, and has become a unique platform that offers music streaming, digital downloads and even physical product. (Frustratingly, Bandcamp is still blocked from selling digital content directly via iOS devices – even though much of this content is unavailable on either iTunes or Apple Music. Surely that’s anti-competitive?) And now there’s an amusing string of “SoundCloud vs Bandcamp” memes doing the rounds which may say a lot about the respective fortunes of these rival services.
Finally, the last word on the current state of music streaming and digital downloads should go to the artist known as L.Pierre. He has just announced the release of his latest and final (vinyl-only) album under that particular moniker, with an accompanying artist statement which could be seen as both an indictment upon and a requiem for the music industry.
NOTE: Apologies to my readers for any confusion regarding the timing and accessibility of this post. Thanks to WordPress, this article “missed” its scheduled time, and the outgoing e-mail notification had a faulty link. Normal service will hopefully be resumed next week…
Next week: Startup Vic’s E-commerce Pitch Night